Tuesday 12th July 2011
Good morning. The EU debt crisis has resurfaced, this time with fears Italy will be the next country to be affected. The news has significantly weakened the Euro, causing GBP/EUR rates to surge. Against other currencies Sterling continued to fall. At 08:30am this morning rates are as follows:
• GBP/EUR 1.1402
• GBP/USD 1.5833
• GBP/AUD 1.4996
• GBP/NZD 1.9472
• GBP/CAD 1.5420
• GBP/ZAR 10.918
• GBP/JPY 126.31
• GBP/DKK 8.5005
• GBP/NOK 8.8589
• EUR/USD 1.3889
Euro weakness due to Italy/Spain causes GBP/EUR to surge
The Euro and European shares have fallen on concerns that the debt crisis in the eurozone may spread to Italy and Spain. The concern is that Italy and Spain may have to follow Greece, Portugal and the Republic of Ireland and seek a European Union and International Monetary Fund (IMF) bail-out.
The news has significantly weakened the Euro, and GBP/EUR exchange rates have surged as a result. Just a week ago rates were in the €1.10’s, and today we are around €1.14. It’s important to remember that Sterling is still fundamentally weak, and it’s only the debt news from the EU that has caused the recovery.
If you need to buy Euros in the next 6 months, bear in mind the Barclays Capital forecast still suggests rates will drop to around 1.06, so you may wish to contact us to discuss ways of locking in the current rate even if it’s some time until you need your Euros.
Sterling falls against USD and other currencies
The Pound fell against the dollar on Monday, tracking losses in a broadly weak euro as concerns that Italy may be the next country to be affected by the euro zone debt crisis prompted investors to seek safety in the U.S. currency. This has strengthened the US Dollar, as investors get the jitters and move funds to the safe haven US Dollar, pushing GBP/USD rates into the $1.58’s.
Today’s data – lots that could affect Sterling
There are lots of UK releases today: Consumer Confidence, Retail Price Index, Goods Trade Balance, Overall Trade Balance, Consumer Prices and House Prices. So, clearly much here that will affect the Pound, depending if the numbers are above or below forecast. From the Eurozone we have German inflation figures and a meeting of EU finance ministers, in which the EU debt crisis will no doubt be discussed. Stateside we have FOMC minutes and Trade balance numbers.
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